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Print E-mail del.icio.us 34 comment(s) - last by honorabili.. on Nov 3 at 1:18 PM

Dell bookkeepers got a little too creative with their figures.

A Federal Trade Commission (FTC) investigation has unveiled some unseemly behavior on the part of Dell Inc. over the years.  As these allegations have come to light, Dell has tried to come clean by revealing an even darker secret.

The Federal Trade Commission’s investigation has been ongoing for the last two years.  It has centered around backdating options to maximize the company's value on paper.  Soon the investigation took a worse turn, though, when it was discovered that Dell was "cooking its books" so to speak to make its earnings seem better than they really were.

Dell's fiscal managers would shuffle money between accounts to try to cover over losses and hide struggles in various departments with successes in others.  Senior executives had knowledge of these activities and even encouraged them.

The money compound and the net result is that the company is $92 million USD less than it said it did over a four year period, or about $23 million USD less per year.

Dell has submitted five amended or updated 10-Q reports with the US Securities and Exchange Commission yesterday accounting for these "errors" based on the results of its internal investigation on the matter.

The reports included a statement which says the following:

[There is] evidence that certain adjustments appear to have been motivated by the objective of attaining financial targets.  According to the investigation these activities typically occurred in the days immediately following the end of a quarter, when the accounting books were being closed and the results of the quarter were being compiled. The investigation found evidence that, in that timeframe, account balances were reviewed, sometime sat the request or with the knowledge of senior executives, with the goal of seeking adjustments so that quarterly performance objectives could be met.

The formal report follows a verbal admission which Dell issued two months ago, covered here at DailyTech.

The problem is not merely that the earnings were misstated, but that the misstatements compounded and made the company appear more valuable than it really was.  This is liable to hurt investors in the firm.

Dell CEO Michael Dell says that now that the unpleasant news is out of the way, the company can resume its quarterly strategy calls late next month -- a practice the company suspended when the investigation began.  The strategy call will take place on November 29, with a stockholders meeting following, the next week. 

It is expected that for these meetings Dell may tap CFO Don Carty, former Disney executive who was recently recruited by Dell to bring back accountability and respectability to the business.

Carty pushed for Dell's financial department to reveal the full extent of its mistake.

Apparently honesty really does pay off.  Following Dell's admission some investors starting buying stock, raising it 2.5 percent last night.  Dell hopes that its admission will lead NASDAQ to not follow through with its threats of delisting.  Most experts think NASDAQ is unlikely to make such a move.

Dell is the second largest seller of home computers in the U.S.  It was formerly number one, but has been struggling, losing market share to HP.  The struggling giant has also been losing business in the server market.  Dell is trying to expand overseas, including in China, as reported at DailyTech.

Dell did show signs of life in the second quarter of 2007, beating expectations.  Hopefully the new revelations are the sign of Dell really turning over a new leaf, as the computer giant faces a difficult uphill struggle regaining market share from its rival HP.


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Robbery
By bighairycamel on 10/31/2007 2:17:47 PM , Rating: 5
If I were to go the the 7/11 and grab $20 out of an open cash register I would be looking at 2-5 years. But yet, a corporate exec can muff up numbers to get his multi-million dollar bonus check evey year, robbing the company and it's shareholders, then appologize and take home the bank.

/gripe




RE: Robbery
By darkpaw on 10/31/2007 3:04:31 PM , Rating: 5
Justice may be blind, but that doesn't stop her from accepting cash, credit, or cashier's check.


RE: Robbery
By FITCamaro on 10/31/2007 3:14:34 PM , Rating: 5
She told me cash only last night. :(

Guess the hookers in your area are more high tech.


RE: Robbery
By AstroCreep on 10/31/2007 7:18:18 PM , Rating: 1
"Bitches be crazy".


RE: Robbery
By StillPimpin on 11/1/2007 9:29:48 AM , Rating: 2
LOL! I don't know how many here would get that but, thanks Ed.


RE: Robbery
By Alexvrb on 10/31/2007 11:04:31 PM , Rating: 5
Yeah but, uh, FIT... you had on your beer goggles. That wasn't Justice. That was Justiqua.


RE: Robbery
By abhaxus on 10/31/2007 11:46:03 PM , Rating: 5
At least it wasn't Justin.


RE: Robbery
By honorabili on 11/3/2007 1:18:01 PM , Rating: 2
The ones in my area have vaginal credit cards.


RE: Robbery
By Oregonian2 on 10/31/2007 3:29:00 PM , Rating: 2
I don't think you'd get much of anything at the 7-11. If you're one year underage and murder the teller, you'd just get one year of detention (at worst) and even have your record made clean. Jails are overcrowded, you can get nearly nothing for very nasty things even if done multiple times (twice anyway, the three-strike rules will then kick in). You can be a serial murderer and kill thousands over twenty years -- the worst you'd get within the SF Federal appeals court jurisdiction area is life in prison (even with a theoretical death sentence).


RE: Robbery
By JackBeQuick on 10/31/2007 4:11:05 PM , Rating: 2
If it was an armed robbery you'd almost certainly be doing time.


RE: Robbery
By Mitch101 on 10/31/2007 3:33:42 PM , Rating: 2
I would expect a shareholder lawsuit to follow.


RE: Robbery
By JackBeQuick on 10/31/2007 4:10:37 PM , Rating: 2
Almost certainly. If Dell doesn't roll on Rollins for this I would not be surprised if some higher courts get involved a la H-P.


RE: Robbery
By killerroach on 11/1/2007 9:13:29 AM , Rating: 3
"Dude, you're getting a subpoena!"


RE: Robbery
By Proteusza on 11/1/2007 6:20:28 AM , Rating: 2
I entirely agree. I dont care if they are part of a corporation, they committed a crime, and they should pay.


RE: Robbery
By Polynikes on 11/1/2007 7:35:15 AM , Rating: 1
There's a reason why pre-Keynesian economists didn't like the idea of government interfering with the economy.


What isn't mentioned?
By JackBeQuick on 10/31/2007 4:13:14 PM , Rating: 3
Did everyone suddenly forget about the $1 billion per year that Intel kicked back to Dell?

That was HUGE news, and now suddenly Dell has all these account errors for the same timeframe? Oh and don't forget that their acting CEO mysteriously quit without warning either.

http://www.dailytech.com/article.aspx?newsid=5964

These guys are really Enron-caliber slime. Dell, Rollins and the lot of them should pay.




RE: What isn't mentioned?
By James Holden on 10/31/2007 6:12:38 PM , Rating: 2
A very good question, and I'm very curious as to the answer. Jason, any thoughts?


RE: What isn't mentioned?
By nofranchise on 10/31/2007 7:59:33 PM , Rating: 1
Oh leave 'em alone! Why does the government have to stick it's nose in wherever it wants!? Next it'll be Haliburton, McDonalds or perhaps even Microsoft! I say no more government snooping and rooting in private corporations affairs. Let the market handle it - the free and beautiful market will judge those who needs judging.

This was a special presentation brought to you in cooperation with FOX News - News you can trust, and the Republican Party. Batteries not included. Caution: Children may swallow whole.


RE: What isn't mentioned?
By Odeen on 11/1/2007 2:52:15 AM , Rating: 2
The problem is that, without perfect information, a free market isn't free. "Free market" only works not just when people are all capable of making perfectly rational decisions, but also when they have the information on which to base those decisions.

Without an overseeing body, this investigation would not have happened.


RE: What isn't mentioned?
By elpresidente2075 on 11/1/2007 3:08:55 AM , Rating: 2
At least the company is still profitable, everyone still has their 401k and they still have a large market share on all fronts.

Lets not forget all this shady action took place years ago, and the fallout is only now starting to become apparent. The current state of affairs is much better at Dell, and hopefully they will continue to put out cheap, reliable (much more so than in previous years) computers for consumers to enjoy.

And don't tell me that if you were presented with an opportunity to make dozens of millions of dollars and get away with it all, that you wouldn't take it. Also, please show me where anyone lost money here, as that aspect seems to be missing here. If someone is stealing, there has to be someone who is getting their money stolen. Who is that?


RE: What isn't mentioned?
By Proteusza on 11/1/2007 6:24:21 AM , Rating: 2
That sounds very much like an ends justifies the means line of thinking.

Frankly, it isnt right. Dell committed a crime by lying about its financial position, and thus should pay for it.

Dell's lies probably affected other retailers - if Dell had not lied about their earnings, and thus got investment and market confidence, perhaps HP, Compaq or Packard Bell would have done better? If I was HP, I would be extremely angry.

On a side note, my company ordered a high powered Dell workstation, and its lopsided! It leans forward.